Kraft Heinz is to be broken into two separate independent companies following a unanimous vote by its board. It comes a decade after the group was created by a mega merger put together by Warren Buffett and 3G Capital.
The US-headquartered packaged food giant will demerge into two distinct, publicly traded companies through a tax-free spin-off in a bid to simplify operations and turn around its ailing performance.
Kraft Heinz said the names of the two new companies would be determined at a later date, with both containing three billion-dollar brands among their portfolios.
Provisionally called Global Taste Elevation Co, one business will focus mostly on sauces, spreads and seasonings from the Heinz, Kraft Mac & Cheese, and Philadelphia brands, generating annual revenues north of $15bn. A search is underway to identify a potential CEO for the business.
The other company, named for now as North American Grocery Co, has yearly sales of about $10bn and supplies a number of category-leading brands such as Oscar Mayer, Kraft Singles and Lunchables. This business will be led by Kraft Heinz CEO Carlos Abrams-Rivera.
Kraft Heinz said the separation would allow each company to “dedicate the right level of attention and resources to all areas of the business”, “reduce operational complexity” and boost financial flexibility.
Chairman Miguel Patricio has been appointed as executive chairman to support the demerger, and the business has established a separation committee.
“Kraft Heinz’s brands are iconic and beloved, but the complexity of our current structure makes it challenging to allocate capital effectively, prioritise initiatives and drive scale in our most promising areas,” said Patricio.
He added the two companies would be better able to “unlock potential” and create shareholder value in the long term after separation.
The separation – which will create up to $300m of dis-synergies – has been on the cards since July, following Kraft Heinz’s revelation in May that the board had been looking at options to create shareholder value.
Kraft Heinz was formed in 2015 when Buffett’s investment firm Berkshire Hathaway and Brazilian PE firm 3G capital oversaw a merger. It followed the pair’s $28bn buyout of Heinz two years earlier.
Shares in the combined entity have fallen two-thirds since the merger, with the failed takeover of Unilever in 2017 weighing heavily on the stock.
Berkshire Hathaway has now swallowed $7.8bn in losses on its 27% stake in Kraft Heinz. Buffett has since admitted that he had “overpaid for Kraft” and been “wrong in a couple of ways” about the combined group.
Despite a comfortable profit performance – it posted a net profit of $2.7bn in the year to 28 December 2024 – Kraft Heinz’s revenue has remained stuck around the $26bn mark since 2016. Revenue is forecast to slip by 1.5% to 3.5% in 2025.
“The board’s unanimous decision to separate into two independent companies came after careful consideration and a comprehensive evaluation of our options,” said the board’s lead director, Jack Pope.
“We strongly believe that increased focus will translate into better performance and value creation for shareholders.”
The break-up is expected to complete in the second half of 2026.
The demerger comes in the wake of similar moves at Kellogg’s, which split its snacking and cereal businesses into two distinct companies, which have since been taken private by Mars and Ferrero respectively.
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